'Non-fungible tokens' or NFTs were designed to help artists keep control of the ownership of their work. However, the sums of money potentially involved in that ownership are proving too attractive for scammers to ignore.
What is an NFT?
An NFT is a digital token that contains unique digital items such as paintings, drawings, animations, songs, or elements from video games. These items can be one-offs like individual works of art or one of a collectible series like trading cards.
NFTs were designed to allow collectors to buy and sell the items on the tokens with the ownership being tracked on the blockchain. However, rather than providing additional security, it appears the NFT craze is beginning to have the opposite effect.
Recent reports suggest a growing number of artists, illustrators and celebrities have become victims of NFT fraud having found their work being openly sold on major art exchanges for significant sums of money.
As solicitors who specialise in art fraud, this comes as no surprise to us. Tens of millions of dollars are being invested in NFTs. It is a trend that recently culminated with the renowned international auctioneers, Christies, closing their first NFT sale for £49m at the beginning of this month.
With potential prizes like this on offer, it wasn’t going to be long before digital criminals began to look for ways to capitialise on the potential rewards on offer.
How has NFT fraud impacted on art theft?
Last week The Daily Telegraph published an article about David Drayton, the German designer who paid around £43 in cryptocurrency for the ownership of a digital image of a Grecian statue. He quickly found out the artwork had actually been stolen and resold without the knowledge of its creator, Hedi Xandt.
Meanwhile, over the last few weeks artist Derek Laufman received several emails and direct messages from fans and contacts asking if he’d started selling NFTs. As he hadn’t, he immediately became suspicious. It didn’t take long to find someone had set up a fake profile to sell his art on Rarible, a well-known NFT trading site. Even though the site took down the profile upon his request, they weren’t able to remove it before devotees had bought pieces of his work.
While this type of art fraud has rocked the art world, it is nothing new.
As early as 2018 Terence Eden, a British coder, had registered himself as the creator of the Mona Lisa via the blockchain start-up Verisart. Although Verisart viewed this as nothing more than a stunt, it seems to have opened the floodgates for scammers.
In our experience NFT scams currently create two types of victims. The artist who is cheated out of their livelihood and the buyer who purchases a piece of art in good faith but under false pretences.
According to Selachii partner Richard Howlett, the problem is the ease with which scammers can put their plans into action:
“As any digital object can become an NFT once it’s been put on the blockchain – or ‘minted’ as it’s called – as things stand today, it is very easy to steal images from the internet or social media and create your own tokens. Added to that, verifying your identity on trading platforms like Rarible and OpenSea is hardly a stringent process. This means that as long as you have a wallet and the funds to cover your first transaction, you can sell any NFT you’ve created.”
How can the crypto-art market protect itself from NFT scams?
According to Richard, there are a few steps artist can take to protect their work. These include watermarking any work they display online and increasing the security on their social media accounts. Taking sole control of the sale of tokens holding their own works of art is of course another option open to artists.
However, given the trading platforms’ attempts to tighten up their security has been limited to say the least, even this additional effort could prove futile until these marketplaces are forced to take more rigorous action.
The good news is the current feeling in the crypto-art market suggests taking those additional steps will have to come sooner rather than later if these platforms are going to have a future. More and more artists have rightly been scared by the reports of art theft. Their nervousness is driving them away from using NFTs, at least until the level of accountability and transparency improves.
While improved protection would obviously offer both artists and collectors greater confidence, Richard’s concern is that it will simply force the scammers to find other ways of using NFTs for their own benefits:
“We have already heard about scams being set up to trick the users of several of the leading NFT exchanges into giving up their personal information by setting up fake wallets. This is a model that has been used by cybercriminals for some time but the fact it’s been updated and adapted to take advantage of NFTs just shows how quickly scammers can update their tactics to meet the latest craze.”
If you have been the victim of an NFT scam (or any other cryptocurrency or digital fraud) please call us today on 020 7792 5649 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..
We will help.
